Part 3. E-Marketing Strategies.- Measure ROI

How do we measure ROI with Social Media?  Return on investment (ROI) is the measure of an activity’s results relative to its cost. The equation for determining ROI, in its most simplistic form, has been presented in a SmartBrief Guide to Social Media as: (Results - costs) ÷ costs = ROI

The equation takes two things into account: Money spent (that’s the investment) and the resulting revenue/savings (that’s the return). Anything that isn’t money (such as the time you spend maintaining your social presence) must be converted into dollars and cents before it can be factored

into your calculations.  Results come in two ways: Income and cost reductions. 

·       Income includes any time your social media presence prompts someone to buy a product from you, donate something to you or hire you to perform a service.

·       Cost reductions are savings on existing business functions that can now be performed at a cheaper rate because of social tools.  Companies often trumpet social media success by announcing results, but outcomes are only half the story. Seeing results from your social media efforts is great, but if you’re spending $200,000 a year to generate $100,000 in sales via Twitter, you’re not seeing positive ROI.

What are Costs?  Anything that goes into the creation of a social media presence can be considered a cost.  Some common costs include:

·       Content creation costs: This could be something as cheap as licensing photos for blog posts or as expensive as buying audio-visual equipment to create videos and podcasts.

·       Training costs: Did you attend a social media conference?  Buy a book or two on social media best practices?  Bring in an expert to train your staff? These costs all count.

·       Software costs: There are dozens of great free social media clients and tools out there. But if you’re serious about determining the ROI of your efforts, you’ll want to at least consider investing in a premium social media client because paid clients offer more robust features and better tracking options than free programs.

·       Labor costs: This is often the biggest cost associated with a social media campaign – and it’s also the one most likely to be overlooked. If you’ve hired a dedicated social media staff member or outsourced your social media efforts to an agency, that cost is easy to measure. If you’re doing it yourself or if one or more employees are working on the company’s social media presence in addition to their other duties, then the calculation becomes more difficult. Typically you’ll need to figure out how much time each person spent on social media and then multiply that figure by their rate. If someone is paid $200 a day and spends half their day on social media, the cost of their social media efforts is $100 per day.